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The B.E. Journal of Macroeconomics

Editor-in-Chief: Abraham, Arpad / Cavalcanti, Tiago

Ed. by Carceles-Poveda , Eva / Kambourov, Gueorgui / Lambertini, Luisa / Ruhl, Kim / Tavares, Jose

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Who Gets the Credit? And Does It Matter? Household vs. Firm Lending Across Countries

Thorsten Beck1 / Berrak Büyükkarabacak2 / Felix K. Rioja3 / Neven T. Valev4

1Tilburg University

2University of Georgia

3Georgia State University

4Georgia State University

Citation Information: The B.E. Journal of Macroeconomics. Volume 12, Issue 1, ISSN (Online) 1935-1690, DOI: 10.1515/1935-1690.2262, March 2012

Publication History:
Published Online:
2012-03-13

While theory predicts different effects of household credit and enterprise credit on the economy, the empirical literature has mainly used aggregate measures of overall bank lending to the private sector. We construct a new dataset from 45 developed and developing countries, decomposing bank lending into lending to enterprises and lending to households and assess the different effects of these two components on real sector outcomes. We find that: 1) enterprise credit is positively associated with economic growth whereas household credit is not; and 2) enterprise credit is significantly associated with faster reductions in income inequality whereas household credit is not. We also find that the share of household credit is higher in more urban societies, in countries with smaller manufacturing sectors and more market-based financial systems, while market structure and regulatory policies are not related to credit composition.

Keywords: financial intermediation; household credit; firm credit; economic growth

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